Hands-Off Investments: A Growing Trend

2018.04.14

Many of the barriers that once prevented the average person from entering the world of investing have since been removed. A big part of this is due to the fact that there are now simple technological solutions for facilitating various forms of investment. Being able to manage investments anywhere and at any time has made a considerable difference in allowing more people to pursue an entrepreneurial career.

Time is one of the barriers to investment that technology only has a very limited power to combat. Some investments need nurturing with care and attention before they can begin to yield decent returns. But in today's fast-paced, hectic world, not everyone has the free time to devote to their investments. This is especially true for those who are investing part-time while they also work in a full-time job.

When they are done right, hands-off investments should not represent a significant drain on an investor’s time or financial resources. The purpose of hands-off investments is to find opportunities to maximize returns while minimizing the amount of hands-on work that is required. Many investors looking for hands-off investment opportunities opt to invest in property because it lends itself well to this style of arrangement.

For entrepreneurs who invest in their spare time and have another regular job, hands-off investments are a way of supplementing their usual income. For investors who have an extensive portfolio to manage, hands-off investments allow investors to keep money flowing in while they focus their efforts on more demanding investments.

Examples

Bonds aren’t the most exciting investment tools out there. However, they are a potentially effective passive revenue stream. When an investor buys a bond, they are essentially investing in the loans given to businesses. In return for the investment they make, a bond provides a fixed interest payment. Once the loan matures, the investor will usually receive the principle and the interest back at the same time.

Most other hands-off investments are made in property. This can either take the form of real estate, which generates income through rentals, or commercial endeavors. For example, purchasing a property and then leasing the space to a business would be an example of a passive income stream.

Robo-Advisors

Robo-advisors, such as the Betterment robo advisor, have been game changers for the world of passive investing. These are digital platforms that use an algorithmic approach to financial planning, often with little to no human oversight. These robo-advisors collect information about users and their current financial status. It compares this with the user’s future goals and then uses a data-driven approach to determine the best investments to make.

It isn’t hard to see why hands-off investing has become such a popular option in recent years. Not only does it offer entrepreneurs the opportunity to make money without having to lift a finger, but the arrival of technological algorithm-based solutions means the entire process can now be mostly automated.